On a Typical Train Journey, There Could Be as Many as 20 Different Fares Being Paid by Passengers Between the Same Two Stations. Using the Concept of Price Discrimination to Help, Explain Why This Might Happen.

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On a typical train journey, there could be as many as 20 different fares being paid by passengers between the same two stations. Using the concept of price discrimination to help, explain why this might happen. Price discrimination occurs when a business charges a different price to different groups of consumers for the same good or service, for reasons not associated with costs. There are many reasons as to why between the same two stations, passengers can be charged different fares. One of the main reasons is to do with the time they are travelling on the train. During peak hours (rush hour, roughly between 7am and 9am) demand is very inelastic. This means that train companies can charge prices as high as they like, as people have no other choice but to still pay up, as they need to get to work on time. Prices are made worse by the fact that at any one particular time during rush hour, that train has monopoly power because only on train can be one the same pair of tracks at any one time. The lack of competition means that prices are unlikely to fall. Commuters do however have the choice of travelling via another mode of transport, such as by car or coach. However, congestion of the roads during rush hour make it an impractical option, hence, the substitutes for trains are very weak. This means train companies gain even more pricing power as they know that even with higher fairs, consumers are unlikely to switch to substitutes because the substitutes will be very inefficient. Commuters travelling during off-peak periods, between the same two stations are likely to have a much lower fare than those travelling during peak hour periods. This is because, during these times, demand exceeds supply. Usually, only a small amount of people will occupy the train, which means the train has a huge amount of spare capacity. It is likely that during these periods,
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